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Summit Hotel Properties (INN) Q2 Earnings call transcript Jul 30, 2024

AInvestWednesday, Jul 31, 2024 4:04 pm ET
1min read

In the recently concluded earnings call for the second quarter of 2024, Summit Hotel Properties showcased a robust performance, highlighting significant growth and strategic moves that underscore the company's resilience and agility in navigating the evolving hospitality sector. Here's a closer look at the key themes and insights from the call.

A Strong Recovery Path

Summit Hotel Properties reported a record-breaking second quarter with a 6% increase in adjusted EBITDAre to nearly $56 million and a 10% increase in adjusted FFO compared to the same period last year. This growth was driven by a 3.4% increase in pro forma RevPAR, marking the 13th consecutive quarter of outperforming the total U.S. lodging industry. The company's portfolio continues to demonstrate a consistent recovery, with 5 of its lagging markets, including New Orleans, Baltimore, Minneapolis, Louisville, and the Greater San Francisco Bay and Silicon Valley area, posting notable growth despite being approximately $22 million below 2019 hotel EBITDA levels.

Strategic Sell-offs and Portfolio Enhancements

The company's strategic moves were evident in the disposal of 9 hotels for a combined $131 million, with a blended capitalization rate of approximately 5%. These sales not only reduced net debt-to-EBITDA ratio but also significantly improved the quality and growth profile of the portfolio. The proceeds from these sales have been used to enhance the balance sheet, reduce near-term CapEx requirements, and position the company for future growth opportunities.

Operational Highlights and Challenges

The second quarter also brought challenges, with RevPAR growth moderating in certain markets, particularly in San Francisco. However, the company remains optimistic about the future, with expectations of continued growth in urban and suburban markets, particularly in areas with strong group demand and technology-related business travel.

Looking Ahead

Looking forward, Summit Hotel Properties expects a year-to-date RevPAR growth of 8% and EBITDA growth of over 30%, reflecting the company's ability to drive profitability and market share. Despite the tempered outlook for peak summer leisure travel months, the company maintains a positive outlook for the remainder of the year, with a focus on managing expenses, driving revenue growth, and maintaining liquidity for future growth opportunities.

Overall, Summit Hotel Properties' second quarter earnings call underscores the company's strong recovery, strategic moves, and operational resilience. The company's focus on improving its portfolio, managing expenses, and capitalizing on growth opportunities positions it well for continued success in the evolving hospitality sector.

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